*

Honorable William W Schwarzer, Senior U.S. District Judge

for the Northern District of California, sitting by designation. 

United States Court of Appeals,

Eleventh Circuit.

No. 95-8171.

UNITED STATES of America, Plaintiff-Appellee,

v.

John E. CALHOON, Defendant-Appellant.

Oct. 16, 1996.

Appeal from the United States District Court for the Middle

District of Georgia. (No. CR-92-12-MAC(DF), Duross Fitzpatrick,

Chief Judge.

Before KRAVITCH and BIRCH, Circuit Judges, and SCHWARZER*

, Senior

District Judge.

SCHWARZER, Senior District Judge:

John E. Calhoon was charged in a 14-count indictment with

violation of 18 U.S.C. § 1001 (false statements) and 18 U.S.C. §

1341 (mail fraud). At trial, the government dismissed two counts.

The jury acquitted on one count and convicted on the remaining

eleven. Each of the eight false statement counts of conviction

charged Calhoon with signing or causing to be signed a Medicare

cost report claiming amounts he knew not to be reimbursable. The

three mail fraud counts of conviction charged him with devising a

scheme to defraud with respect to three of the false cost reports

by use of the mail. Calhoon appeals from the judgment of

conviction. We have jurisdiction under 28 U.S.C. § 1291 and 18

U.S.C. § 3741(a) and affirm.

FACTUAL BACKGROUND

The charges against Calhoon arose out of actions he took while
employed by Charter Medical Corporation (CMC), a national hospital

chain headquartered in Macon, Georgia and composed of both

medical/surgical and psychiatric hospitals. Calhoon was

responsible for obtaining Medicare reimbursement for a group of the

psychiatric hospitals belonging to CMC. To obtain reimbursement,

CMC filed cost reports with private insurance companies acting

under contract with the Health Care Financing Administration

(HCFA), the agency within the Department of Health and Human

Services responsible for administering the Medicare program. These

private insurance companies act as fiscal intermediaries to review

and, as necessary, to audit cost reports to determine the amount of

reimbursement to which the provider of Medicare-insured services is

entitled. Calhoon chaired one of two sections at CMC responsible

for filing cost reports with the intermediaries; in that capacity

he supervised a group of accountants who prepared the reports.

To satisfy provider hospitals' cash requirements, the

intermediaries paid CMC periodically throughout the fiscal year for

estimated Medicare costs. At the end of the fiscal year, CMC filed

annual cost reports for each hospital setting out the costs that it

actually incurred. Based upon those cost reports, the

intermediaries determined the correct amount of Medicare

reimbursement for the year and either paid CMC the amount due or

billed it for excess interim payments.

Cost reports filed on behalf of a provider hospital include a

statement of the total costs expended by the hospital for each

category of expense. Some costs included in a cost report are

clearly identifiable as either reimbursable or nonreimbursable.
Other costs are subject to dispute. In order for the provider

hospital to preserve its right to challenge any potential

disallowance of an item of cost or part thereof, the provider must

include that item within the cost report. The cost report filing

process requires providers to identify accurately both the nature

and the amount of the costs claimed, thereby permitting the

intermediary to identify and disallow the nonreimbursable costs,

while allowing the provider to preserve on appeal its claim for

those costs which it deems reimbursable. More specifically, on the

settlement page of the cost report, the provider identifies as

presumptively nonreimbursable the cost for which it nonetheless

seeks reimbursement. This is referred to as filing "under

protest." The intermediary then determines which costs are

reimbursable based on the regulations enacted by the Secretary of

Health and Human Services and a set of policy decision/guidelines

called the Provider Reimbursement Manual ("Prov.Reimb.Man.").

Because of the sizeable volume of cost reports submitted to

intermediaries, however, the intermediaries give only some cost

reports a full audit, including a field visit by the intermediary

to the hospital to compare the cost reports with the hospital's

internal records. Other cost reports receive only cursory review.

When presented with a cost report, the intermediary generally does

a preliminary desk audit to determine whether a field audit is

appropriate based on the information presented by the provider.

After an intermediary conducts whatever audit it deems

appropriate, it issues a notice of program reimbursement to the

provider. The provider then has 180 days to negotiate any disputed
issue with the intermediary or to file an appeal with an

administrative body known as the Provider Reimbursement Review

Board.

Calhoon's convictions were based on claims in cost reports

filed on behalf of six different CMC hospitals between 1987 and

1989.

DISCUSSION

I. VIOLATION OF SECTIONS 1001 AND 1341

To sustain a conviction for violation of 18 U.S.C. section

1001, the government must prove (1) that a statement was made; (2)

that it was false; (3) that it was material; (4) that it was made

with specific intent; and (5) that it was within the jurisdiction

of an agency of the United States. See United States v. Lawson,

809 F.2d 1514, 1517 (11th Cir.1987). To sustain a conviction for

mail fraud under 18 U.S.C. section 1341, the government must prove

(1) intentional participation in a scheme to defraud a person

(including the government) of money or property; and (2) the use

of the mails in furtherance of the scheme. See United States v.

Smith, 934 F.2d 270, 271 (11th Cir.1991). The government charged

that Calhoon's submissions by mail of the Medicare claims at issue

constituted a scheme to obtain money by virtue of the false

documentary claims. Thus, the mail fraud convictions rest on the

false statement convictions. Calhoon challenges the validity of

these convictions on the grounds that the statements at issue,

i.e., the claims for Medicare reimbursement, were neither false nor

material.

 We review de novo whether Calhoon's conduct violated sections
1001 and 1341. See Lawson, 809 F.2d at 1517. We also review de

novo whether there was sufficient evidence to support the

convictions; in so doing, we review the evidence in the light most

favorable to the government, accepting all reasonable inferences

and credibility choices made in the government's favor, to

determine whether a reasonable trier of fact could find that the

evidence established guilt beyond a reasonable doubt. See United

States v. Keller, 916 F.2d 628, 632 (11th Cir.1990), cert. denied,

499 U.S. 978, 111 S.Ct. 1628, 113 L.Ed.2d 724 (1991); United

States v. Gafyczk, 847 F.2d 685, 691-92 (11th Cir.1988).

A. Falsity

 Falsity under section 1001 can be established by a false

representation or by the concealment of a material fact. See 18

U.S.C. § 1001 ("Whoever ... falsifies, conceals or covers up by any

trick, scheme, or device a material fact, or makes false,

fictitious or fraudulent statements or representations ... shall be

fined not more than $10,000 or imprisoned not more than five years,

or both."); United States v. Tobon-Builes, 706 F.2d 1092, 1096

(11th Cir.1983) (falsity based on concealment of a material fact).

Calhoon's convictions were based on Medicare claims for three

separate categories of expenses: (1) royalty fees paid to CMCI, a

sister subsidiary, (2) interest paid to CMCI ("CMCI interest"), and

(3) advertising costs claimed under the label of "outreach."

Regarding the claims for royalty fees and CMCI interest, the

government essentially maintains that Calhoon made false

representations by claiming reimbursement for costs that were

nonreimbursable under the applicable Medicare provisions. Calhoon
argues, however, that no provisions made these costs clearly

nonreimbursable and claiming them as reimbursable therefore cannot

be a false representation and the basis of criminal liability.

Regarding the advertising costs, the government maintains that by

claiming reimbursement for advertising costs under the term

"outreach," Calhoon concealed the true nature of the costs as

advertising, some of which is reimbursable and some of which is

not. Calhoon argues, however, that "outreach" was a factually

accurate description of the costs and a term accepted by the

industry to describe certain advertising. Thus, he argues,

claiming these costs as outreach cannot constitute falsity. For

the reasons discussed below we conclude that the claims for all

three types of costs were false for purposes of section 1001.

1. The Intercompany Charges: Royalty Fees and CMCI Interest

Linton Newlin, the person responsible for tax planning and

related matters for CMC, testified that he created a Nevada

corporation, CMCI, as a subsidiary of CMC in order to gain various

tax advantages. CMC transferred ownership of the Charter name to

CMCI, and individual hospitals then paid a one-time royalty fee to

CMCI to use the Charter name. Because Charter is a national

corporation, the hospitals benefitted from the use of the name and

because CMCI was incorporated in Nevada where corporations are not

subject to state income tax, CMCI increased its profits through tax

savings.

Besides licensing the Charter name, CMCI obtained funds from

the parent company and loaned the money to the CMC hospitals,

which, in turn, paid back the principal with interest to CMCI. The
hospitals took a tax deduction for interest payments to CMCI, and

CMCI paid no state corporate income tax on the interest income.

Newlin testified that actual money was paid by the hospitals to

CMCI on account of both the royalty fees and the CMCI interest.

Calhoon freely admitted both in an investigative interview and

at trial that he believed at all times relevant that the royalty

fees and CMCI interest were presumptively nonreimbursable under the

applicable Medicare provisions. See R.A. Vol. 8, p. 134; R.A.

Vol. 9, pp. 103-04. John Banfield (one of Calhoon's former

subordinates) testified, and the jury accepted, that Calhoon

instructed Banfield to claim for reimbursement the royalty fees and

interest paid to CMCI but to recognize the probable disallowance of

the claims by listing the amounts on reserve cost reports. R.A.

Vol. 7, p. 161; R.A. Vol. 8, pp. 12-13; R.A. Vol. 9, p. 110.

a. Royalty Fees

The government contends that the royalty fees claimed were

nonreimbursable because: (1) they were unrelated to patient care,

see 42 U.S.C. § 1395x(v)(1)(A); 42 C.F.R. § 413.9, and (2) they

were not an actual expense, see 42 U.S.C. § 1395x(v)(1)(A); 42

C.F.R. § 413.17. It argues that the royalty fee amounted to a

franchise fee paid to a related party for the use of the Charter

name. As such, CMC money was simply being moved from one pocket to

another, making the fee nonreimbursable because it was not an

actual expense. See 42 U.S.C. § 1395x(v)(1)(A); 42 C.F.R. §

413.17. The government also argues that providers must accurately

identify the nature and amount of each cost claimed. The cost

reports here did not disclose that the royalty fees were paid to a
related company, CMCI.

Calhoon challenges his convictions based on the claims for

royalty fees on the grounds that there are no statutes or

regulations clearly prohibiting reimbursement of the royalty fees,

and that the former policy guideline on reimbursement of royalty

fees was repealed in 1982 and superseded by more general guidelines

that arguably permit reimbursement. See Prov.Reimb.Man., Part 1 §

2133, repealed by Transmittal No. 263 (Mar. 1982);

Prov.Reimb.Man., Part I § 2135. More specifically, Calhoon argues

that the statutory and regulatory standards governing whether a

royalty fee is reimbursable require only that the costs be

"actually incurred" and reasonably related to patient care. See 42

U.S.C. § 1395x(v)(1)(A) (reimbursable costs include "reasonable

cost of any services shall be actually incurred," except "incurred

costs found to be unnecessary in the efficient delivery of needed

health services"); 42 C.F.R. § 413.9 (reimbursements must be based

on costs reasonably related to patient care). Calhoon contends

that the royalty fees at issue were costs actually incurred because

CMCI actually billed the hospitals and the hospitals paid the

royalty fees to CMCI. As to whether the costs were reasonably

related to patient care, Calhoon argues that the issue is open to

debate and that the government failed to produce any evidence

showing that the royalty fees were not related to patient care.

Thus, Calhoon argues, his convictions cannot be upheld because the

government failed to sustain its burden of negating any reasonable

interpretation that would make the royalty fees reimbursable and

thereby render the statements in the cost reports factually
correct. See, e.g., United States v. Race, 632 F.2d 1114, 1119-21

(4th Cir.1980) (government failed to satisfy its burden of proving

falsity where billings were authorized under a reasonable

interpretation of the terms of the authorizing contract); United

States v. Anderson, 579 F.2d 455, 459-60 (8th Cir.), cert. denied,

439 U.S. 980, 99 S.Ct. 567, 58 L.Ed.2d 651 (1978). Moreover,

Calhoon argues, because there is no definite legal standard making

royalty fees nonreimbursable, his convictions are unconstitutional.

See Dunn v. United States, 442 U.S. 100, 112, 99 S.Ct. 2190, 2197,

60 L.Ed.2d 743 (1979) ("[F]undamental principles of due process ...

mandate that no individual be forced to speculate, at the peril of

indictment, whether his conduct is prohibited.... Thus, ... courts

must decline to impose punishment for actions that are not "plainly

and unmistakably' proscribed.").

(i) Reimbursability

 We reject Calhoon's contention that there is no provision

making the royalty fees paid to CMCI clearly nonreimbursable.

Calhoon's arguments focus on whether any provision made the royalty

fees clearly nonreimbursable by virtue of their nature as royalty

fees. The critical fact is, however, that these royalty fees were

paid to CMCI, a company related to the hospitals by common

ownership. CMC, the parent company, owned both the hospitals that

were paying the royalty fees for use of the Charter name and CMCI,

the Nevada subsidiary that owned the Charter name and collected the

royalty fees. Therefore, regardless of whether certain royalty

fees are generally reimbursable, whether the royalty fees here were

reimbursable is governed by 42 C.F.R. § 413.17 which applies to
 1

Calhoon challenges treatment of the hospitals and CMCI as

"related organizations" under this regulation. But the

regulation clearly provides that organizations are "related"

through common ownership, which "exists if an individual or

individuals possess significant ownership or equity in the

provider and the institution or organization serving the

provider." See 42 C.F.R. § 413.17(b)(2). Being commonly owned

by CMC, the provider hospitals and CMCI are clearly related

organizations within the meaning of the regulation. 

expenses paid to related organizations.1 That regulation provides

in relevant part:

(a) Principle. Except as provided in paragraph (d) of

this section, costs applicable to services, facilities, and

supplies furnished to the provider by organizations related to

the provider by common ownership or control are included in

the allowable cost of the organization at the cost to the

related organization. However, such cost must not exceed the

price of comparable services, facilities, or supplies that

could be purchased elsewhere.

 . . . . .

(c) Application.... (2) If the provider obtains items of

services, facilities, or supplies from an organization, even

though it is a separate legal entity, and the organization is

owned or controlled by the owner(s) of the provider, in effect

the items are obtained from itself. An example would be a

corporation building a hospital or a nursing home and then

leasing it to another corporation controlled by the owner.

Therefore, reimbursable cost should include the costs for

these items at the cost to the supplying organization.

However, if the price in the open market for comparable

services, facilities, or supplies is lower than the cost to

the supplier, the allowable cost to the provider may not

exceed the market price.

42 C.F.R. § 413.17.

Under this regulation, expenses paid by the hospitals to

CMCI—including the royalty fees at issue here—are reimbursable only

"at the cost to [CMCI], the supplying organization." See 42 C.F.R.

§ 413.17(c). At trial, the government's expert, Bessie Wheeler,

explained that royalty fees paid to a related company solely for

the use of a name would not be an actual expense for the company
and, therefore, would not be reimbursable by Medicare. R.A. Vol.

6, p. 106. She explained that, for the fee to be reimbursable, it

would have to be paid in exchange for an actual service that the

related company provided at a real cost. Id. The reimbursable

costs related to the Charter name may have been actual costs of

acquiring and maintaining the Charter trademark. Whether the

royalty fee paid is reimbursable depends in part on whether it

reflected actual cost to CMCI of the acquisition or maintenance of

the Charter name. See 42 C.F.R. § 413.17. If the royalty fees did

not directly reflect such an actual cost, they would not have been

reimbursable. See 42 C.F.R. § 413.17; cf. Prov.Reimb.Man., Part

1, § 1011.5 (Govt.Supp.Br., Ex. 7, p. 20) (policy guideline

illustrating the application of § 413.17 in the context of a rental

expense: where provider leases a facility from a related

organization, costs of ownership of the facility are the allowable

costs, not the rent paid to the lessor by the provider). The

government, having apparently offered no evidence on this issue,

failed to sustain its burden to prove the claim false by virtue of

the nonreimbursable nature of the interest.

(ii) Concealment of a Material Fact

 By concealing that the royalty fees were paid to a related

company, however, Calhoon made the claim for reimbursement false.

As stated above, falsity under section 1001 includes concealment of

a material fact. See Tobon-Builes, 706 F.2d at 1096. Falsity

through concealment exists where disclosure of the concealed

information is required by a statute, government regulation, or

form. See id. at 1096; United States v. Hernando Ospina, 798 F.2d
1570, 1578 (11th Cir.1986). 42 C.F.R. § 413.20(d) states that:

(1) The provider must furnish such information to the

intermediary as may be necessary to—

(I) Assure proper payment by the program, including the

extent to which there is any common ownership or control (as

described in § 413.17(b)(2) and (3)) between providers or

other organizations, and as may be needed to identify the

parties responsible for submitting program cost reports; ....

Moreover, the cost report forms specifically ask the provider the

following questions:

A. ARE THERE ANY COSTS INCLUDED ON WORKSHEET A [on which the

royalty fees were claimed] WHICH RESULTED FROM TRANSACTIONS

WITH RELATED ORGANIZATIONS AS DEFINED IN HCFA PUB 15-I,

CHAPTER 10?

B. COSTS INCURRED AND ADJUSTMENTS REQUIRED AS RESULT OF

TRANSACTIONS WITH RELATED ORGANIZATIONS:

C. INTERRELATIONSHIP OF PROVIDER TO RELATED ORGANIZATION(S):

The cost report form then specifically notifies the provider that:

THE SECRETARY, BY VIRTUE OF AUTHORITY GRANTED UNDER SECTION

1814(B)(1) OF THE SOCIAL SECURITY ACT, REQUIRES THE PROVIDER

TO FURNISH THE INFORMATION REQUESTED ON PART C....

THE INFORMATION WILL BE USED BY THE HEALTH CARE FINANCING

ADMINISTRATION AND ITS INTERMEDIARIES IN DETERMINING THAT THE

COSTS APPLICABLE TO SERVICES, FACILITIES, AND SUPPLIES

FURNISHED BY ORGANIZATIONS RELATED TO THE PROVIDER BY COMMON

OWNERSHIP OR CONTROL, REPRESENT REASONABLE COSTS AS DETERMINED

UNDER SECTION 1861 OF THE SOCIAL SECURITY ACT.

The relevant cost reports failed to disclose that CMCI was a

related organization and was receiving the royalty fees claimed for

reimbursement. This fact, as discussed above, is critical to the

determination whether the royalty fees could be reimbursable. Its

concealment constitutes falsity for purposes of section 1001.

b. CMCI Interest

 The government contends that the CMCI interest payments were

nonreimbursable because they were expenses paid to a related
 2

The government does not contend that the amounts claimed

are not reimbursable because the claims are duplicative. 

company. See 42 C.F.R. § 413.17 and discussion supra pp. ---- - --

--. The government argues that the interest did not represent

actual costs incurred by CMCI, as required by 42 C.F.R. § 413.17.

The payment of interest, the government argues, was merely movement

of money from one pocket of CMC, the parent corporation, to

another. Calhoon argues, however, that the government at no time

attempted to show that the interest expense did not represent an

actual cost and, therefore, did not bear its burden of proving the

falsity of the statement.

Don Crosset, former head of Charter's Medicare reimbursement

division from 1981 through 1987, testified that the hospitals were

taking out loans for new construction. See R.A. Vol. 7 p. 58. The

actual cash ultimately loaned to the hospitals "was being

generated" by CMC, the parent corporation. Id. CMC then "funded

out [that cash] to the Nevada company," CMCI, and CMCI "in turn,

loaned [the money] to the hospitals." Id. Crosset testified that,

as a result of these transactions, there was a reimbursable cost to

CMC, the parent company. The company policy was for CMC to account

for that cost in claims for the home office expenses. In order to

avoid duplicating costs, CMC had an internal policy that individual

hospitals should not claim the CMCI interest as reimbursable.2

As discussed above, where a provider obtains services,

facilities, or supplies from a related organization, the

reimbursable cost includes only "the costs for these items at the

cost to the supplying organization." 42 C.F.R. § 413.17. In this
case, the supplying organization obtained the money loaned to the

hospital from yet another related organization, the parent company.

See 42 C.F.R. § 413.17(b)(1) ("Related to the provider means that

the provider to a significant extent is associated or affiliated

with or has control of or is controlled by the organization

furnishing the services, facilities, or supplies."); 42 C.F.R. §

413.17(b)(3) ("Control exists if an individual or an organization

has the power, directly or indirectly, significantly to influence

or direct the actions or policies of an organization or

institution."). Whether the interest paid by the hospital to CMCI

is reimbursable depends on whether it reflected the actual cost to

CMC, the related organization that was ultimately the source of the

loan. See 42 C.F.R. § 413.17. If the interest claimed was

actually the amount of interest CMC was paying an outside lender

for the money or the exact income stream foregone by CMC when it

chose to lend the money to a subsidiary rather than to invest it

outside of the enterprise, the CMCI interest may have been

reimbursable. See 42 C.F.R. § 413.17; R.A.Vol. 6, p. 111

(testimony of Wheeler, the government's expert, that whether the

CMCI interest was reimbursable under the regulations pertaining to

related company transactions depended on where the related

organization obtained the money); cf. Prov.Reimb.Man., Part 1, §

1011.5 (described supra p. ----). The government having offered no

evidence about the source of the money obtained by CMC, the cost to

CMC to obtain it, or the aggregate cost of CMC's loaning it to CMCI

and of CMCI's loaning it to the hospital, failed to sustain its

burden of proving that the interest payment was nonreimbursable.
Nonetheless, as with the royalty fees, the cost reports the

government introduced demonstrate that Calhoon concealed that the

CMCI interest was an expense paid to a related organization. As

discussed above, this fact was critical to the determination of

whether it could be reimbursable. Its concealment constitutes

falsity for purposes of section 1001. See supra p. ----.

2. Advertising Expense Claimed as "Outreach"

 Four of Calhoon's section 1001 convictions relate to claims

he made for reimbursement of advertising costs. Calhoon filed cost

reports in which he claimed various types of advertising expenses

under the label "outreach." In addition, he created a second set

of books—new general ledgers—which collapsed into one account

labelled "outreach" advertising accounts that appeared separately

in other ledgers. The government maintains that Calhoon

intentionally disguised advertising costs as outreach in order to

mislead the intermediaries and to obstruct their audits. The

government essentially argued falsity under section 1001 based on

concealment of a material fact.

Calhoon, on the other hand, contends that the term "outreach"

accurately describes the advertising and that the term is

recognized in the industry. He therefore argues that claiming

reimbursement for advertising costs under that label could not be

false.

42 C.F.R. § 413.20(d) states that "[t]he provider must furnish

such information to the intermediary as may be necessary to ...

[a]ssure proper payment by the program...." Under the guidelines

in the Manual, certain advertising costs are reimbursable and
others are not. See Prov.Reimb.Man. § 2136. The Manual provides

that advertising costs are generally reimbursable if reasonably

related to patient care and primarily designed to advise the public

of the services available through the hospital and to present a

good public image, but not if designed to increase patient census.

See Prov.Reimb.Man. § 2136.1. That certain advertising costs are

presumptively nonreimbursable obligates a provider seeking

reimbursement to identify the costs as "advertising" and to reveal

the nature of the advertising. In addition, 42 C.F.R. § 413.20(a)

requires providers to maintain financial records for proper

determination of reimbursable costs using "[s]tandardized

definitions ... that are widely accepted in the hospital and

related fields...." Thus, Calhoon had a legal duty to disclose

both in the cost reports and in the general ledgers that the costs

claimed were in fact "advertising" costs. Instead, he chose to

call the costs "outreach," thereby concealing the potentially

nonreimbursable nature of the costs.

Wheeler, the government's expert witness, testified that in 22

years' experience with Blue Cross/Blue Shield of South Carolina,

she had never seen the term "outreach" used in Medicare cost

reporting; nor had she ever heard "outreach" as a synonym for

advertising. R.A.Vol. 6, p. 101. Moreover, Calhoon, a former

fiscal intermediary, knew that this term would conceal the nature

of the costs and nonetheless chose to use the label specifically

for that reason. As one of his subordinates testified, Calhoon

admitted that the "outreach" account was created so that there

would be no red flag alerting Medicare auditors to the
nonreimbursable advertising expenses. See R.A.Vol. 8, p. 116.

Calhoon similarly told another subordinate that "if just one

intermediary misses an adjustment because it is called outreach,

these general ledgers have served their purpose." See R.A.Vol. 8,

p. 205. The evidence was sufficient to lead a reasonable jury to

conclude beyond a reasonable doubt that, by using the term

outreach, Calhoon concealed the true nature of the advertising

costs claimed for reimbursement, thus establishing falsity under

section 1001.

3. Medicare as a Flexible, Discretionary System

 Calhoon also makes a more general argument that claiming

costs for Medicare reimbursement can never give rise to criminal

liability so long as the costs claimed were actually incurred. He

justifies this contention on the grounds (1) that because Medicare

is a flexible and discretionary reimbursement system in which the

administrative guidelines in the Provider Reimbursement Manual give

only presumptive guidance, (2) that the intermediaries' decisions

are only presumptive, and (3) that the denial of reimbursement can

be challenged on appeal. See Shalala v. Guernsey Memorial

Hospital, 514 U.S. ----, ---- - ----, ----, 115 S.Ct. 1232, 1236-

37, 1238-39, 131 L.Ed. 106, 116-17, 119 (1995) (intermediary's

disallowance based on Manual guidelines is presumptive only, and

subject to appeal); Medical Center Hosp. v. Bowen, 839 F.2d 1504,

1512-13 (11th Cir.1988) (same). Calhoon argues that under this

system he is entitled to claim reimbursement for costs that may be

nonreimbursable and, therefore, that doing so can never be a false

statement.
 While it is true that a provider may submit claims for costs

it knows to be presumptively nonreimbursable, it must do so openly

and honestly, describing them accurately while challenging the

presumption and seeking reimbursement. Nothing less is required if

the Medicare reimbursement system is not to be turned into a cat

and mouse game in which clever providers could, with impunity,

practice fraud on the government. As Wheeler, the government's

expert witness testified, if a provider disagrees with the

intermediary, with the intermediary's past decisions, with the

instructions or guidelines in the Provider Reimbursement Manual, or

with the regulations, the provider must file the cost report "under

protest." See supra p. ----. Calhoon testified that he understood

this system of filing presumptively nonreimbursable costs and that

he, in fact, used this system for other types of costs claimed in

the very cost reports at issue here. Yet he failed to follow this

procedure for the royalty fees, the CMCI interest, or the

advertising costs.

In sum, Calhoon's argument misses the crux of his offense:

the filing of reports intended and designed to deceive and mislead

the auditors for the purpose of obtaining reimbursement of costs

Calhoon knew to be at least presumptively, if not clearly,

nonreimbursable. Available time and resources do not permit audit

of more than a fraction of the cost reports filed. Calhoon's

filing of reports claiming costs that were at least presumptively

nonreimbursable while concealing or disguising their true nature

was a deliberate gamble on the odds that they would not be

questioned.
The evidence amply sustains the findings of falsity.

B. Materiality

 The trial court, without objection, instructed the jury that

the false statements were material as a matter of law. Following

the trial, the Supreme Court decided United States v. Gaudin, ---

U.S. ----, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995) holding that

materiality is a jury issue. The Gaudin holding applies

retroactively to this appeal. See Griffith v. Kentucky, 479 U.S.

314, 328, 107 S.Ct. 708, 716, 93 L.Ed.2d 649 (1987).

 We review assertions of error not objected to at trial for

plain error. See Fed.R.Crim.P. 52(b); United States v. Olano, 507

U.S. 725, 732-34, 113 S.Ct. 1770, 1776-78, 123 L.Ed.2d 508 (1993).

This is true even where, as here, error arose only by virtue of a

later Supreme Court decision. See United States v. Kramer, 73 F.3d

1067, 1074 (11th Cir.1996). Under plain error review, reversal for

unobjected-to error is permitted, though not required, where the

error is both (1) plain and (2) affects substantial rights. Olano,

507 U.S. at 732-36, 113 S.Ct. at 1776-79; Kramer, 73 F.3d at 1074.

The failure to submit the question of materiality to the jury is

plain error. Kramer, 73 F.3d at 1074. Therefore, we need only

address the question whether Calhoon's substantial rights were

affected, i.e., whether the failure to submit the issue of

materiality to the jury affected the outcome of his trial. See id.

at 1075. We conclude that it could not have affected the outcome

because there is no reasonable argument that the statements at

issue here were not material.

"To satisfy the element of materiality, it is enough if the
statements had a "natural tendency to influence, or be capable of

affecting or influencing a government function.' " United States

v. Diaz, 690 F.2d 1352, 1357 (11th Cir.1982) (quoting United States

v. Markham, 537 F.2d 187, 196 (5th Cir.1976), cert. denied, 429

U.S. 1041, 97 S.Ct. 739, 50 L.Ed.2d 752 (1977)). We have explained

that:

The Government does not have to show actual reliance on the

false statements. A statement can be material even if it is

ignored or never read by the agency receiving the

misstatement. False statements must simply have the capacity

to impair or pervert the functioning of a government agency.

Diaz, 690 F.2d at 1357 (citing United States v. Lichenstein, 610

F.2d 1272, 1278 (5th Cir.), cert. denied sub nom. Bella v. United

States, 447 U.S. 907, 100 S.Ct. 2991, 64 L.Ed.2d 856 (1980)).

Calhoon argues that whether the costs he claimed were

reimbursable was debatable and that he therefore had the right to

claim them on the cost report. Under the regulatory review

process, the intermediary conducts an independent investigation and

determines the reimbursability of the costs. If the intermediary

determines the costs are nonreimbursable, the provider is denied

payment. Essentially, Calhoon argues that because there is an

intermediate step—the audit—his claims did not have the capacity to

influence the government. But this ignores that the intermediaries

necessarily rely on the information provided in the cost report to

make their reimbursability determinations, and it ignores the

reality of limited audit capability. See R.A.Vol. 6, pp. 70-71.

The cost reports were sufficient to persuade the intermediary to

authorize reimbursement without further investigation. They,

therefore, had the capacity " "to impair or pervert the functioning
of a government agency' " by misleading the intermediaries. See

Diaz, 690 F.2d at 1357 (citing Lichenstein, 610 F.2d at 1278).

Moreover, it makes no difference that the initial review for

reimbursement is done by the intermediary as opposed to the

government agency itself. The intermediaries are acting under

contract with the Department of Health and Human Services, which

relies, at least in part, on the intermediaries' determination as

to reimbursability of the costs.

II. SENTENCING ISSUES

A. Guideline Computation

 Calhoon argues that the district court erred in determining

that he is responsible for $31,000 in intended losses pursuant to

U.S.S.G. § 2F1.1(b)(1). He contends that only actual loss is

relevant and that the Medicare program sustained none.

 Section 2F1.1(b)(1) of the United States Sentencing

Guidelines requires that the offense levels be adjusted upward

based on the loss attributable to the defendant. Loss "need not be

determined with precision. The court need only make a reasonable

estimate of the loss, given the available information." U.S.S.G.

§ 2B1.1, comment. (n. 3) (1988); see U.S.S.G. § 2F1.1, comment.

(n. 7) (1988) (referring to § 2B1.1). This court reviews district

court loss calculations for clear error. United States v.

Menichino, 989 F.2d 438, 440 (11th Cir.1993).

At sentencing, the government argued that Calhoon should be

held responsible for attempting to defraud the Medicare program of

$1,596,365. R.A.Vol. 11, p. 22. The government arrived at this

figure through a complex series of calculations based on the
Medicare regulations. Calhoon argued that the government sustained

no actual loss and that no loss was intended. R.A.Vol. 11, pp.

189-90. He admitted, however, that suspect entries on the cost

reports had a potential "reimbursement effect" of approximately

$31,000. R.A.Vol. 11, pp. 69, 139. Both parties presented

witnesses and other evidence in support of their contentions at the

day-long sentencing hearing. The sentencing court, noting that it

had "as many questions at the end of the day as [it] had at the

beginning," rejected the government's figure and imposed sentence

based on the $31,000 figure suggested by Calhoon. R.A.Vol. 11, p.

193. We find no error.

Calhoon's assertion that he should be held responsible only

for actual loss is without merit. The Sentencing Guidelines

recognize that attempted or intended loss is a valid measure of

culpability. U.S.S.G. § 2F1.1, comment. (n. 7) (1988); United

States v. Shriver, 967 F.2d 572, 574 (11th Cir.1992). Calhoon's

reliance on United States v. Wilson, 993 F.2d 214 (11th Cir.1993),

is misplaced. In Wilson, this court held that incidental or

consequential loss is not relevant for purposes of sentencing. Id.

at 217. Wilson did not hold that actual loss need always be

calculated; nor did it hold that intended loss is an inappropriate

measure of loss. At sentencing, Calhoon admitted that, if the

disputed claims had not been intercepted by an auditor, the claims

could have netted CMC an additional $31,000 in reimbursements.

That admission is sufficient to establish that, in making the false

statements, he intended that the government suffer a loss in that

amount. Cf. Shriver, 967 F.2d at 574.
B. Acceptance of Responsibility

 Calhoon argues that the district court's refusal to grant an

adjustment for acceptance of responsibility amounted to a penalty

for exercise of his Sixth Amendment right to trial by jury. The

government argues that the district court's decision was not

clearly erroneous and that Calhoon's constitutional rights were not

infringed.

 A defendant bears the burden of showing that he is entitled

to an acceptance of responsibility reduction. United States v.

Anderson, 23 F.3d 368 (11th Cir.1994). Even a defendant who pleads

guilty is not entitled to a sentencing reduction for acceptance of

responsibility as a matter of right. United States v. Anderson, 23

F.3d at 369; see United States v. Cruz, 946 F.2d 122, 126 (11th

Cir.1991). "[A]cceptance of responsibility" is a "multi-faceted

concept," which considers

among other things, the offender's recognition of the

wrongfulness of his conduct, his remorse for the harmful

consequences of that conduct, and his willingness to turn away

from that conduct in the future.

United States v. Scroggins, 880 F.2d 1204, 1215 (11th Cir.1989),

cert. denied, 494 U.S. 1083, 110 S.Ct. 1816, 108 L.Ed.2d 946

(1990). This court reviews district court findings regarding

acceptance of responsibility for clear error. United States v.

Carroll, 6 F.3d 735, 739 (11th Cir.1993) cert. denied sub nom.

Jessee v. United States, 510 U.S. 1183, 114 S.Ct. 1231, 127 L.Ed.2d

576 (1994).

 At sentencing, Calhoon argued that he should be given credit

for acceptance of responsibility because he had cooperated fully

with authorities and had not denied any of the alleged overt acts.
R.A.Vol. 11, pp. 4-6; PSI Addendum. He also argued that the

denial of an adjustment would infringe his right to trial by jury.

Id. The district court determined that Calhoon was not entitled to

a reduction for acceptance of responsibility because he had not

accepted responsibility at all. The court expressed its unease

about awarding Calhoon credit for accepting responsibility,

pointing out that the guidelines anticipate remorse and

acknowledgment of wrongdoing. R.A.Vol. 11, p. 170. The court

offered Calhoon an opportunity to accept responsibility before the

sentence was imposed, but Calhoon declined to do so. Because, at

sentencing, Calhoon maintained that the acts underlying his

conviction were not improper, the court did not err in denying

adjustment for acceptance of responsibility.

Nor does such a denial violate Calhoon's constitutional

rights. As this court has previously recognized, a reward in the

form of an adjustment for acceptance of responsibility for those

who plead guilty "does not equate with punishing one who does not

follow such a course." United States v. Castillo-Valencia, 917

F.2d 494, 501 (11th Cir.1990), cert. denied sub nom. Pulido-Gomez

v. United States, 499 U.S. 925, 111 S.Ct. 3120, 113 L.Ed.2d 253

(1991); see also Carroll, 6 F.3d at 739-40) (Fifth Amendment right

not to testify not infringed by failure to grant adjustment for

acceptance of responsibility).

III. OTHER ISSUES

Calhoon raises a number of other issues, all of which are

meritless. We address each briefly below.

A. Count Four Conviction: 100 Percent of Advertising Costs Were

Reimbursed
 Calhoon argues that the conviction on count four must be

reversed because the outreach costs claimed were actually

reimbursed. But the fact of reimbursement affects neither the

falsity nor the materiality of the statement in the cost report

claiming advertising costs as outreach.

"A document is false when made or used, if it is untrue and is

then known to be untrue by the person making or using it."

Eleventh Circuit Pattern Jury Instructions, Criminal Cases, Offense

Instruction 29 (1985); see United States v. Anderson, 579 F.2d 455

(8th Cir.1987). What made the claim for outreach false was that it

concealed a material fact—the nature of the costs as advertising

costs, which may or may not have been reimbursable. Calhoon,

therefore, made a false statement the moment "outreach" was claimed

in the cost report and supported by a general ledger reflecting the

same. That the costs were ultimately reimbursed does not make the

statement true when made.

 As to materiality, section 1001 does not require proof that

the statement actually misled the government; the false statement

need only "have the capacity to impair or pervert the functioning

of a government agency." Diaz, 690 F.2d at 1357 (citing

Lichenstein, 610 F.2d at 1278).

B. TEFRA and LCC Limitations

 Two types of limitations set a ceiling on Medicare

reimbursement. One is the "LCC" limitation: A provider may be

reimbursed only for the lower of either actual costs or the charges

for the services. The other was imposed by the Tax Equity and

Fiscal Responsibility Act of 1982 (TEFRA). Under TEFRA, a target
amount is determined according to a hospital's cost reporting

"base" period, usually the first 12-month reporting period of its

history. The target amount is set by taking the hospital's base

year, determining the cost per Medicare case, and capping future

claims based on the base cost. R.A.Vol. 7, p. 37. The provider

generally is not reimbursed for costs exceeding the TEFRA target

amount.

Calhoon argues that the TEFRA target rates applied to the cost

reports relevant to all counts other than 2, 12, and 13. He points

out that, although he did not self-disallow the royalty fees, CMCI

interest, or advertising costs on the statement of total costs made

in the cost reports, the total allowable costs without those

disputed claims exceeded the TEFRA target amount. Because of the

TEFRA cap, Calhoon argues, the government could not have been

misled and his statements were, therefore, immaterial. The

government responds that the TEFRA limitation could only have

affected counts 6, 7, and 14 and that the TEFRA ceiling can be

protested so as to permit increased reimbursement.

So far as we can tell from the record, the TEFRA limitation

did not specifically bar reimbursement for any of the claimed

nonreimbursable costs; all the cost reports are therefore

material. In any event, the existence of the ceiling does not

exculpate Calhoon from having made false reports.

C. Count Five: Calhoon Not "Official" Supervisor

 Calhoon also argues that the conviction on count 5 must be

reversed because, at the time this report was filed, he had not yet

become reimbursement manager, and therefore, he could not have been
responsible for the relevant cost report or have "caused" it to be

filed. However, the evidence shows that Parker, the person who

submitted the report, was "instructed and advised" by Calhoon and

that he considered Calhoon his supervisor. That evidence is

sufficient to establish that Calhoon "caused" the falsity as

alleged in the indictment.

D. Deliberate Ignorance Instruction

 Calhoon argues that the "deliberate ignorance" charge was

unsupported by the evidence and, therefore, should not have been

given to the jury. In determining whether sufficient evidence

supported a jury charge, we review the evidence in the light most

favorable to the government. Glasser v. United States, 315 U.S.

60, 80, 62 S.Ct. 457, 469-70, 86 L.Ed. 680 (1942).

 Calhoon testified at trial that he knew royalty fees were not

reimbursable but that he simply had not noticed they were included

in a cost report because of his role as a hands-off manager. On

this evidence, the jury could properly be instructed that he

deliberately avoided knowledge of the specifics of reports. See

United States v. Langford, 946 F.2d 798, 801-02 (11th Cir.1991),

cert. denied, 503 U.S. 960, 112 S.Ct. 1562, 118 L.Ed.2d 208 (1992).

Moreover, the evidence shows that Calhoon actually instructed his

subordinates to claim the nonreimbursable costs. In view of the

evidence of his direct involvement, it is difficult to see how the

instruction could have been prejudicial.

E. Admission of Opinion Testimony on Outreach/Advertising

 William E. Hoffman, Jr., former Senior Manager and Director

of Appeals at CMC, testified that he had told Calhoon that he did
not think that it was proper to collapse all advertising accounts

into a single account called "outreach" both because not all

advertising was outreach and because collapsing the advertising

into a single account did not specifically identify the

reimbursable outreach costs. Hoffman testified that Calhoon

disagreed. They therefore discussed the matter with Richard

Shackelford, an attorney who handled CMC's appellate matters when

outside counsel was required. Hoffman asked Shackelford his

opinion as to whether it was appropriate to file the collapsed

ledgers. At trial, Calhoon's counsel objected to Hoffman's

testifying about Shackelford's answer on the ground that it was

hearsay. After hearing argument from both parties on the matter,

the district court overruled the objection, permitting Hoffman to

testify that Shackelford said that they should absolutely not be

filing the collapsed general ledgers. Calhoon challenges the

admission of Shackelford's statements on the grounds that it was

hearsay and irrelevant and that any relevance it did have was

outweighed by danger of unfair prejudice. See Fed.R.Evid. 402,

403, 801, 802.

Calhoon cites United States v. Race, 632 F.2d 1114 (4th

Cir.1980) in support of his argument. In Race, the falsity of the

statements that served as the basis for a section 1001 conviction

depended upon the interpretation of terms of a contract. The court

held that expert testimony on the meaning of the contract terms was

superfluous and improper. Race, 632 F.2d at 1119-20.

Calhoon apparently cites Race for the proposition that the

testimony here was erroneously admitted because it constituted
expert testimony on the meaning of the Medicare regulations in

relation to whether claiming the advertising costs as "outreach"

was unlawful. However, the government offered Hoffman's testimony

about Shackelford's statements not for the truth of Shackelford's

statements, but to prove that Calhoon was on notice that there was

reason to question the propriety of his actions. Therefore, the

testimony was not hearsay and was relevant to whether Calhoon had

knowingly filed false claims. See Fed.R.Evid. 801(c); United

States v. Gold, 743 F.2d 800, 817-18 (11th Cir.1984), cert. denied,

469 U.S. 1217, 105 S.Ct. 1196, 84 L.Ed.2d 341 (1985) (where former

employees testified that they had put their superiors on notice

that there was reason to question whether the company's billing

practices were in compliance with the law, court held the testimony

relevant because it established that the conspirators had reason to

know that their activities were illegal).

 On whether the probative value was outweighed by an unfair

prejudice, this court defers to the discretion of the trial court.

United States v. Elkins, 885 F.2d 775, 784 (11th Cir.1989), cert.

denied, 494 U.S. 1005, 110 S.Ct. 1300, 108 L.Ed.2d 477 (1990). We

will reverse the trial court's decision to admit the testimony only

if it were clearly an abuse of discretion. We find none here. The

trial court instructed the jury regarding the limited purpose for

which the testimony was offered. Moreover, in light of our

conclusion that collapsing the advertising accounts into one

category called "outreach" resulted in a false statement, we see no

unfair prejudice that could have come from the challenged

testimony.
F. Denials of Motions for New Trial and for Directed Verdict and

Acquittal

Finally, Calhoon challenges the district court's denial of

both his motion for a new trial and his motion for a directed

verdict and acquittal. The foregoing discussion disposes of the

merits of those challenges. The evidence was clearly sufficient to

sustain Calhoon's convictions, so the trial court did not err in

denying Calhoon's motions.

The judgment is AFFIRMED.